Power Procurement

In a deregulated market, wholesale power can be purchased in three ways:

Fixed Purchases

Customers who value stability and simplicity in managing their electricity supply would choose fixed or secured electricity procurements. Achieving clarity into monthly spending and avoiding volatility risks are a priority for many customers. A fixed price covers all of customers’ usage so they aren’t exposed to market price changes; they pay one fixed price per kilowatt-hour (kWh) for all of their electricity usages. Customers will have to make one-time decision, accept one price, and one simple bill.

Flexible Index Purchases

Several factors will affect both volatility and opportunity risk for purchasing power. It is important to find a strategy to balance risks and achieve budget certainty amidst an unpredictable environment.

A fixed price may only achieve budget certainty in the short-term. By thinking and acting long-term, customer can have the security of a fixed price and the flexibility to respond to market conditions over time. Percentages of load may be purchased at regular intervals over a longer time horizon to smooth the curve and manage to the mean.

Index Plus Block Purchases

Energy markets are volatile, but customer usage patterns may be consistent. While a fixed price strategy feels secure, it often feels like opportunities are missed. For customers with the flexibility and a level of risk tolerance to take a more strategic approach with the power purchasing strategy, a blended solution may achieve their goals.

Index Plus Block Purchase allows customers to fix a portion of their loads to mitigate volatility risk while allowing them to benefit from low prices.

Regardless of the procurement mechanism selected by our clients, TEG is positioned to support their procurement objectives and provide additional services including:

Ongoing energy procurement strategy

Contract performance tracking and accounting reconciliation

Data analysis and reporting

Analysis of renewable dispatch scenarios into wholesale/retail markets and their impacts on energy trading hubs, contract prices, and zonal LMPs

Analysis of transmission constraints and congestion patterns and their impacts on zonal LMPs and contract prices

Analysis of competing generation and transmission lines and their impacts on zonal LMPs and contract prices

Complete supply and demand analysis and current market conditions for market participants

Analysis of the existing contract with respect to rate adjustments, facility charges, termination liabilities, connection charges, contract terms/conditions and negotiation strategies before signing a new contract

The power industry is into a period of transformation and profound change driving by Technological change, competitive forces and chancing customer expectations. Regulatory changes are needed for utilities to meet evolving market and customer expectations.